The rupee (INR), which opened the day on a flattish note yesterday, closed the session marginally lower at 73.85 against the dollar (USD). Today, the local currency has begun the session at 73.82. The price action looks bearish and the rupee is trading below the support level of 73.7 and hence it could drop further for the day.
Also read: What made India the biggest buyer of US treasury securities in Apr-July
From the current level, the immediate support can be spotted at 74. Subsequent support levels are at 74.2 and 74.4. But if the INR appreciates from here and rallies past the hurdle at 73.7, it could advance towards the resistance band of 73.5 and 73.4.
Foreign Portfolio Investors (FPI) sold a significant amount of domestic assets yesterday even though the market ended the day on a flat note. The net outflow on Tuesday stood at ₹1,456 crore (equity and debt combined). If the FPI sell-off continues, the domestic currency can come under further pressure.
Dollar index
The dollar index, which was in an uptrend last week, has been facing downward pressure in the past two trading sessions. Notably, it closed below the important support of 94 yesterday. But since it remains above the 21-day moving average, bulls have a chance to regain momentum. Importantly, 94 holds the key from the short-term trend perspective.
Trade strategy
For the past two days, 73.85 has been acting as a minor support for the rupee. So, even though the local currency can be bearish until it trades below 73.7, traders can short INR with a tight stop-loss if it falls below 73.85.
Supports: 74 and 74.2
Resistances: 73.7 and 73.5
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